Ponzi scheme: Forex trader admits defrauding clients of $7 million

Eighteen investors suffered a loss. Photo/Getty Images.

An Auckland foreign exchange broker has admitted running a Ponzi scheme to defraud his clients of more than $7 million.

Kelvin Clive Wood (69) pleaded guilty at the Auckland District Court to representative charges of "obtaining by deception" and "theft by person in a special relationship" brought by the Serious Fraud Office.

The SFO said Wood created a ponzi scheme after his foreign exchange brokerage began to suffer net trading losses.

He used new investors' funds to pay other investors their reported gains or to refund investment principal. None of Wood's clients were aware that their funds were being used to repay other investors, the SFO said.

More than $7 million of investment principal belonging to 18 investors was lost by the defendant over an eight-year period.

"Mr Wood earned the trust of a group of investors through his personal and professional association with them," SFO director Julie Read said in a statement.

"He misappropriated their funds and falsely reported trading profits so they would not seek to withdraw their funds. The SFO will prosecute all serious fraud matters brought to our attention to protect other investors and New Zealand's reputation as a corruption-free market."

The case follows other forex frauds prosecuted by the SFO.

Last July Lance Jack Ryan was jailed for seven years and six months after being convicted on fraud charges relating to forex platform BlackfortFX. His co-defendant, Jimmy McNicholl was sentenced to 11 months of home detention and $50,000 in reparations.

The pair used BlackfortFX to persuade more than 900 investors, mostly from the Christchurch region, to invest about $8.3 million in the ponzi scheme.

Wood was remanded on bail to reappear for sentencing at the Auckland District Court on July 24.

He ran his alleged scam through two companies: Forex (NZ) and Forex NZ 2000 and his largest investors loast $1m each, the SFO said.

The Financial Markets Authority referred the case to the SFO to investigate in May 2017.